Every UK home to face 15pc energy price rise

A massive increase in gas and electricity bills for all of Britain's 24 million homes is to be announced by all the major energy companies in the next few weeks.

The country's energy giants are preparing to increase fuel bills by 15 per cent. This follows the decision by Npower, the fourth largest supplier, to raise prices by as much as 27 per cent on certain tariffs last week.

With rising food, petrol and borrowing costs eating into household budgets, there is a growing fear among economists that a leap in fuel bills will spark a consumer downturn which in turn could see layoffs in the retail and construction sectors.

Senior executives from some of the UK's biggest energy suppliers told The Observer that sharp price rises are virtually certain and will be announced next month. Around 24 million homes in Britain are served by the six major companies, and the increases will make household gas and electricity bills almost double what they were five years ago.

Officially, firms say they are 'monitoring movements in the energy markets' where oil surged through the $100-a-barrel level for the first time last week. But in private they admit price rises are inevitable in the next four weeks.

'In the recent past, one supplier goes [for a rise] and four to six weeks later the rest of the market goes,' said a senior figure at one supplier. 'I expect that by mid-February we will follow suit. We were shocked by the 27 per cent figure. Everyone knows oil is $100 a barrel and that pushes up gas prices. Most of the suppliers will look for prices rises of 15 per cent.'

The government acknowledged there is little it can do. Energy Minister Malcolm Wicks said: 'Price changes are commercial decisions for the companies involved and we must recognise the fact the global demand is pushing up energy costs worldwide.' He added: 'The competitive energy market has delivered over the last decade significant savings for UK consumers and is monitored by an independent regulator, Ofgem.'

But he said the government recognised the effects price rises can have on businesses, 'especially on vulnerable customers. Tackling fuel poverty is a priority and since 2000, we have spent £20bn on benefits and programmes including winter fuel payments and funding for heating and insulation in low income homes.'

Karl Brookes, spokesman at consumer watchdog Energywatch, said the rises would 'wreak havoc' on consumers. He attacked firms which ratcheted up prices at the rate of 'an Olympic sprinter once harsh winds of rising costs start but drop prices at a snail's pace as energy prices ease'. Last week the Bank of England warned that one million home owners face a £1,000 'credit crunch tax' as the cost of borrowing rises after the US sub-prime mortgage disaster and the Northern Rock crisis.

Britons have £222bn of outstanding credit card bills as lenders refuse to pass on cheaper interest rates. The Citizens Advice service has already reported a sharp increase in inquiries from the public facing severe financial difficulties and it expects the situation to get worse this year.

Liberal Democrat environment spokesman Steve Webb said: 'Energy price increases on this scale, if repeated by other suppliers, will drag well over half a million people into fuel poverty. Meanwhile, far too many elderly people are having to pay a fortune to heat draughty and poorly insulated houses. This drives pensioners further into poverty and is bad news for the planet.'

Fears are growing that a retail and construction downturn could spark an increase in unemployment.

The UK is particularly prone to gas price rises, say energy experts, because European power monopolies like Germany's E.ON and Gaz de France, which supply British consumers, buy North Sea gas during the summer months to put into storage to replenish reserves used up during winter. But instead of releasing the gas for sale in the UK during winter, much of it is often held back for their French and German customers.